From tokenization to artificial intelligence: How is Southeast Asia’s fintech sector evolving? | Pressroom

Southeast Asia’s Fintech industry is at a critical juncture, balancing innovation with regulatory challenges and market pressures. Stephanie Magnus, director of our financial services regulatory and fintech practice groups, provides her insights on the rapidly evolving fintech landscape in Southeast Asia in an interview with Asian Legal Business:

• Prepare for market consolidation and M&A opportunities: We expect consolidation and increased M&A activity to occur in specific industries such as payments, particularly as the valuation expectation gap between buyer and seller narrows. There will also be an opportunity to look at distressed assets. There is also interest in the use of artificial intelligence and Gen AI, and there will be interest in seeing how to leverage the opportunities of artificial intelligence to introduce efficiencies into the Fintech space.

• Fintechs will need to identify new opportunities in an increasingly crowded market: Fintechs should explore new opportunities so as not to enter an already crowded market, particularly with potentially shorter runways from a funding perspective. Opportunities in ESG, SME or consumer space continue to be attractive. Digital tokenization is also sparking widespread discussion among technology players, smaller fintech companies, and larger financial institutions interested in the potential for increased liquidity on a cross-border basis. This is a space destined to grow.

• Evolving AI regulations may require an adaptable business strategy and robust governance: business models need to be considered in light of evolving regulation and data privacy concerns, and it would be wise to plan ahead. Rules around the use of AI or AI generation will likely become more pervasive across jurisdictions. As technology permeates, Fintechs should also expect data privacy and cybersecurity regulation to evolve. With the growing use of artificial intelligence, governance is crucial. Artificial intelligence must be used in a way that is fair, ethical and in which there is adequate accountability and transparency towards users. Companies should therefore establish a governance process to ensure that AI operates within legal limits and is fit for purpose.

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